How to Help Your Partners Transition to Cloud
Partners are always asking if they need to get into the cloud. Their next question? How to do it.
This week, we met with Robert Fox, VP of Sales at Strategy to Revenue to discuss the answers to these frequent questions. Here are his insights.
Why is it Important for Suppliers to Drive their Partners’ Transition to the Cloud?
Every partner I speak with is asking about if they need to get into the cloud. My answer? Yes.
Cloud is ubiquitous since it is so attractive to end users, and there are several advantages of a cloud solution that make end users more competitive:
They can better manage their cash flow, and their software budgets can move from CapEx to OpEx.
Since cloud is consumption based, they can more easily scale the number of seats up or down, while only paying for the licenses they need.
They can move with faster speed since the installation is more of a click vs. a complex install.
They are assured of the latest technology, and can be confident that it will be competitive and current.
Their data will be secure and protected
So, the reality is the market is requiring a transition to cloud, and suppliers need to help their partners make that transition to stay competitive, relevant, and profitable.
Partners have told me they are losing on-premise deals they thought were locked up to competitors selling cloud solutions. Most partners are still selling on-premise solutions and there is still a market for this, but in order to survive, they know they need to make the leap into cloud.
They are acutely aware that if they don’t make this transition, they won’t be able to meet the market demand.
How to Identify On-Premise Partners Who Should Transition to Cloud
There are only a few "born in the cloud" partners. So, how does a supplier go about identifying which of their on-premise partners should transition to cloud? Ideally all of them need to make the transition but it is important to prioritize where to focus.
The transition to cloud is all about the ability and willingness to change, so start by working with partners who are open to the transition.
In the past, I’ve heard most partners tell me, “My on-premise business is healthy, so I don’t need to change.” But, more recently, I’m seeing more acknowledgement that they need to explore cloud since most of their customers are now requesting cloud solutions.
Partners are seeing their cloud pipelines growing as much as 6x their pipelines of a year ago, and their customers are all asking what cloud offerings they have available.
I’m seeing this interest from both of the basic types of on-premise partners: the “lifestyle” partner and the partners with a big installed base who want to keep growing.
Although we often think of the lifestyle partner as one being comfortable with the status quo, this partner is now thinking about their exit strategy. They realize that when it comes time to sell their company, they will not maximize their valuation if they’re on-premise only.
The recurring revenue model of a cloud practice increases their valuation in addition to being more attractive for exponential long term growth.
So, suppliers really need to work with all of their partners to determine the best candidates.
Start with a conversation around level setting expectations with your partners. Many partners think they’re already “in the cloud” if they’re hosting software. But often suppliers are really looking for partners to resell their cloud solutions. After they align on expectations, the supplier needs to put their energy into communication and education.
The biggest challenge for the partner is where to start. It is the role of the supplier to help their partner understand the steps to effectively make the change to a cloud provider.
The Top 3 Challenges Partners Face when Transitioning to Cloud, and How to Overcome Them
Challenge #1: Adjusting to Cloud Economics
The single greatest challenge partners face when moving to a cloud model is cash flow. Cloud economics are radically different from on-premise.
In a hypothetical $500K on-premise deal, the partner (and their sales team) would recognize the revenue from software and services up front. If this same deal happens in the cloud, the partner still has the same cost of sales, but the revenue now comes in over three years.
Suppliers need to make sure they share their economic modeling with their partners. They need to point out the cash required up front and the time to break even, which can take anywhere from one to three years depending on the solution. This can be a very painful component of the transition for the partner. It’s important to help the partner to understand how to navigate the transition successfully.
Since cloud is all about volume and transactions, suppliers should get creative in terms of helping their partners with digital marketing through funds, collateral, or programs. Historically partners have invested in targeted marketing. Digital marketing requires getting your brand recognized by as many prospects as possible. It requires creating compelling content andusing key works that drives traffic to your website.
Challenge #2: Service Revenue Changes
The second challenge I hear is around the partners services revenue, since cloud also changes how these revenues are contracted and billed. Again, the opportunities move from potential big opportunities for integration and installation to a simpler one-click installation model.
Suppliers can help their partners determine how to evolve their services to compete the cloud world. Of course, there is work to be done to get to the customer ready for that click-to-install point, and partners should offer the services to get the customer ready.
Suppliers can also help brainstorm additional services the partner could offer such as security, needs analysis, or data mining.
Challenge #3: Adjusting Your Partner’s Culture from On Premise to Cloud
Culture is the third challenge for any partner. Moving to cloud is a big transition. The partner may have to change their sales team, their compensation structure, their marketing messages, and their infrastructure.
A change of this nature has to be driven from the top down. The partner executive team needs to be committed and fully engaged to achieve a smooth transition. They need to be informed and educated about the time and costs required to make it through a complete transformation. If they are not 100% committed, it will be a long, drawn out, and financially painful transition with a low likelihood of success.
Suppliers should coach their partners through the various stages of change management. They can offer their partners guidance on how to be cloud ready by sharing best practices in compensation, enablement, and infrastructure.
Suppliers Need to Focus on Education & Communication
What are the most important elements for a supplier to address to help their partners succeed in cloud? Education and communication.
In my surveys, 80%-90% of partners tell me they are very interested in moving to the cloud, but haven’t made that first move. They fundamentally know this is where they need to go but need help in understanding the steps and requirements.
Suppliers can separate themselves from the competition by educating their partners on suggested organization structures and recommended compensation plans. To help the partner manage profitability, they will need coaching on how to manage their cash flow, how to evolve their marketing awareness and demand generation strategy, and what consulting services are viable in a cloud model.
They also need to create incentives that encourage the partner to make the transition rapidly, such as putting a multiplier on partner program benefits for cloud deals vs. on-premise deals. Suppliers should help partners create demand, and provide enablement tools such as references, playbooks, or sales collateral so the partners don’t have to create this for themselves, and so they are on message.
3 Steps Partners Can Take to Ensure Success
The most successful partners who are making the change to cloud are doing a number of things right.
They are keeping their on premise business running, and investing the profits from their current business to fund and fuel a cloud practice. They are setting up a completely separate cloud business with a different sales team, compensation plan, and marketing strategy.
They are carving out a vertical industry niche for themselves. They know that being an expert in a select few verticals is a way to show unique value to both the customers and suppliers, and to get invited to deals.
They are leading with cloud. Even though the majority of their deals are still being done on-premise, they are talking about cloud first with every customer. They are helping their customer identify parts of the business where introducing could make sense, such as keeping their ERP system on-premise for now but moving HR to the cloud as a first foray. They know their customers are thinking cloud, so if they leave it out of the conversation, they will not be seen as a viable solution provider for that customer.
The market is moving to cloud, and suppliers need to help their partners take that first step, then stick with them along the way to help them stay competitive and grow.
About the Author
This was a contributed blog post from Robert Fox, a senior sales, marketing, and channel enablement expert, and VP of sales at Strategy to Revenue. He has trained thousands of supplier reps on channel financial acumen and on how to transition partners to the cloud.